Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust

High Court of Australia|1988-10-14|Before: McHugh JJ, Brennan J

High Court of Australia Brennan, Deane, Toohey, Gaudron and McHugh JJ. Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27

ORDER Appeal allowed with costs. Set aside the order of the Court of Appeal of New South Wales, and in lieu thereof order that the appeal to that Court be dismissed with costs.

The facts of this case are set out in the majority judgment. The critical chronology is as follows:

1 April 1989 Date after which Immer is entitled to rescind the deed of sale under cl. 7 thereof for non-approval by the Council of the City of Sydney ("the Council") of the transfer of the T.F.S.

26 June 1989 Immer's solicitors' letter forwarding draft deed of assignment containing, in par. C, the Recital that "the Council has approved the said transfer subject to this Deed and a notice pursuant to this Deed being entered into and served upon the Council".

1 June 1989 Immer's solicitors advised by fax by the Council's solicitor confirming that the T.F.S. "cannot be transferred until the restoration work to Pilgrim House has been completed" and advising that the "Trust is therefore not yet in a position to complete the sale of the T.F.S. to your client".

22 August 1989 The Trust's solicitors inform Immer's solicitors of the Council's decision of 14 August 1989 specifying conditions of approval of transfer.

25 August 1989 Immer gives notice of rescission for non-grant of approval of transfer by 1 April 1989.

The Court of Appeal held Immer to be bound by the deed of sale and to be obliged to complete the purchase of the T.F.S. (approval of the transfer having been ultimately granted) on the ground that, by its letter of 26 June forwarding a draft deed of assignment for execution by the Trust, it had elected to affirm the contract. Accordingly, the notice of rescission of 25 August was held to be ineffective.

A basic requirement of an election between alternative rights arising under a contract is that the party electing should know the facts which give rise to those rights [27] or, perhaps, at least be taken to have known of those facts. Immer must have known on 26 June that the time limited by cl. 7 had expired without a grant of approval and that it was entitled under cl. 7 to rescind the deed. But Immer's letter was written on the footing that the Trust was then in a position to complete the transfer as evidenced by par. C of the Recitals in the draft deed. If the letter of 26 June were an election not to rescind, it was an election sub modo, conditional upon the Trust's ability to complete the transfer at that time. The letter cannot be construed as an unqualified election to affirm the contract whether or not the Trust was in a position to complete the transfer. If the Trust was not then in a position to complete the transfer, the qualification was not satisfied, and there was no election.

Khoury v Government Insurance Office (NSW) (1984), 165 C.L.R. 622, at pp. 633-634.

An act amounting to an election must be unequivocal [28] . Where a contract can be terminated at the option of a promisee, the right to terminate is not necessarily lost by the promisee doing any act consistent with the continuance of the contract. If the act is also consistent with the reservation of a right to terminate in certain events, the right to terminate is not lost by the doing of the act. Thus, in Tropical Traders Ltd v Goonan [1] a vendor who was entitled under the general law to rescind a contract for the sale of land by reason of the purchaser's failure to complete within the time limited, time being of the essence of the contract, did not lose its right to rescind by giving the purchaser additional time. By promising to affirm the contract if the price and an additional sum were paid by a later date, the vendor was held not to affirm the contract but merely to limit the exercise of its power to rescind. Although Immer made no further bargain with the Trust, Immer's solicitors' letter enclosing the draft deed of assignment containing Recital C could not be construed as an election to affirm the contract but merely as an intimation that, if the Trust was in a position to complete, Immer was not intending to exercise its right to rescind. Immer did not elect on 26 June not to rescind even if the Trust were unable to complete the transfer.

Matthews v Smallwood [1910] 1 Ch777, at p. 786; P Samuel Co Ltd v Dumas [1924] AC. 431, at p. 477; Brown v Smitt (1924), 34 C.L.R. 160, at p. 168; Elder's Trustee Executor Co Ltd v Commonwealth Homes Investment Co Ltd (1941), 65 C.L.R. 603, at p. 616. 2. (1964) 111 C.L.R. 41, at p. 55.

After the Council's advice on 29 June that the Trust was not in a position to complete the sale, further representations were made to the Council to obtain approval of the transfer. Once the Council's decision of 14 August specifying the conditions of approval was communicated to Immer's solicitors, Immer elected to rescind. Nothing that occurred after 26 June altered the situation until Immer elected to rescind on 25 August. In O'Connor v S P Bray Ltd [2] , Jordan C.J. said in reference to alternative rights conferred by a contract [3] :

where there has been no intimation of avoidance, the question whether delay, after knowledge of the facts giving rise to avoidability, or things said or acts done during the delay, constitute such an election to go on with the contract as puts an end to the right to avoid, depends upon "the length of the delay and the nature of the acts done during the interval, which might affect either party, and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy": Lindsay Petroleum Co v Hurd [4] . This is the position, also, when it is sought to rely on acts done as constituting an irrevocable election not to avoid: (ibid.); Abram SS Co v Westville Shipping Co [5] ; Torrance v Bolton [6] ; and it appears to be the position, where it is sought to rely on things said, where these are not so express and explicit as to entitle the other party to rely on them as an affirmance: Brown v Smitt [7] . Where a promisor or a promisee has the right to elect which of alternative promises he will perform or enforce, according to where the right of choice may lie, an intimation of election is irrevocable; but this is because the intimation is, in effect, an acceptance which determines the nature of a contractual right: Leake on Contracts, 6th ed., (1911), pp. 485-487.

(1874) L.R. 5 P.C. 221, at p. 240. 2. [1923] A.C. 773, at pp. 779, 789. 3. (1872) L.R. 8 Ch. App. 118, at p. 124. 4. (1924) 34 C.L.R., at pp. 167-168.

It would appear, therefore, from the authorities, that an intimation of an election between alternatives of itself produces no irrevocable results, except in cases where the intimation, of itself, produces legal consequences independently of any question of election, or where it is necessary that the choice should be treated as irrevocable, in order to do justice to the other party [8] .

cf. Ward v Day (1863), 4 B. S. 337, at p. 352 [122 E.R. 486, at pp. 491-492]. Neither of the excepted cases applies here.
1. (1936) 36 S.R. (N.S.W.) 248, at pp. 261-262.
2. See Sargent v ASL Developments Ltd (1974), 131 C.L.R. 634, at p. 645, per Stephen J.
3. (1874) L.R. 5 P.C. 221, at p. 240.
4. [1923] A.C. 773, at pp. 779, 789.
5. (1872) L.R. 8 Ch. App. 118, at p. 124.
6. (1924) 34 C.L.R., at pp. 167-168.
7. cf. Ward v Day (1863), 4 B. S. 337, at p. 352 [122 E.R. 486, at pp. 491-492].

It was obvious that at no time prior to Immer's notice of rescission on 25 August had it elected to affirm the contract without the Trust's being able to complete the transfer. It was obvious also, once the Council's resolution of 14 August was passed, that Immer was entitled then to exercise its right to rescind under cl. 7. It exercised that right and the contract was thereupon terminated.

I would allow the appeal, set aside the order of the Court of Appeal and restore the judgment and orders of Young J.

This appeal concerns the question whether the purchaser under an agreement for sale abandoned its contractual right to rescission and elected to affirm the agreement. As the agreement was for the sale of "air space", it is necessary to say something about the subject matter.

Air space is the subject of two documents emanating from the Sydney City Council ("the Council"): "Transferable Floor Space: Summary of Council's Present (Interim) Policy" and "Development Control and Floor Space Ratio Code". For present purposes the operation of these documents is sufficiently explained in the judgment of the primary judge, Young J.:

It would appear that, under the town planning codes of this city, provisions have been made for buildings to have a maximum floor space ratio. However, there is also a provision that where there is an historic building, which cannot utilize the ratio to advantage, it is possible to transfer the overplus to some other site, either an adjacent site or a site in the same precinct. It would appear that the reason for this is that funds can be provided to the owner of the historic site to preserve the building and at the same time other land in the city will become more valuable because it will be able to bear a higher building. It would seem that there is a market in the city for these bonus floor site ratios and the present transaction is an illustration of what happens.

It is apparent that in the present context we are not concerned with the transfer of an estate or interest in land but with the acquisition by one owner of land from another of the right to erect a building beyond a prescribed height. The existence of the right and its assignability arise from the Council's power to grant development applications. Any reference in this judgment to air space rights must be understood accordingly.

The respondent ("the Uniting Church") is the owner of Pilgrim House at 262 Pitt Street, Sydney. In September 1987 it lodged a building application to refurbish the property completely. The proposal did not make use of the maximum floor space ratio and the Uniting Church was therefore entitled, potentially, to build within an additional 1,214 m2 of air space. The appellant ("Immer") was developing land at 197-199 Castlereagh Street, Sydney. Immer was looking to acquire additional air space rights to add to those associated with the Castlereagh Street site so as to achieve a building of the height it wished to erect upon its site. The Uniting Church agreed to sell its excess air space rights to Immer for the sum of $2,306,600. To that end, the parties entered into a deed dated 14 October 1988. The relevant clauses of the deed are cll. 1(a) and (b), 3, 5 and 7, which read:

(a) The Purchaser shall within fourteen (14) days of the date hereof make application to the Council for the transfer of the surplus bonus (herein called "the Application").

(b) The Purchaser shall take all reasonable steps to diligently and expeditiously pursue the application when lodged and to seek approval of the Council thereto.

Completion shall take place within seven (7) days of notice by one of the parties to the other that the Council has granted the application. Such written Notice must contain a copy of a Resolution by the Council or letter from the Council to the effect that all of the Council's requirements for the transfer of the surplus bonus have been satisfied ("completion date").

The Vendor shall prior to, on or at any time after the completion date execute any deeds or documents required to be executed by the Council or reasonably required to be executed by the Purchaser and do any such further things as may be reasonably necessary to comply with the requirements of the Council for the approval to the transfer of the surplus bonus required by the Purchaser to enable it to utilize the surplus bonus on the recipient site including without limitation signing [a] notice pursuant to section 12 of the Conveyancing Act 1919.

In the event that approval is not granted to the application within ninety (90) days from the date of completion of the restoration work on Pilgrim House then the Vendor may at any time thereafter and if "approval" is not granted by 1.4.89 then the Purchaser may at any time thereafter rescind this Deed by notice in writing to the other whereupon the provisions of clause 9 hereof shall apply.

Before the parties entered into the deed, the Council had recognized the existence of excess air space rights in the Uniting Church, when it wrote on 14 September 1988:

This is to confirm that pursuant to the Council's resolution of 7th June, 1988, a notification has been placed on the Council's Register that 1214 square metres of floor space may be transferred from the site of Pilgrim House.

Please note that none of this space may be incorporated in development on any other site until restoration work on Pilgrim House has been completed to the Council's satisfaction.

After the parties had executed the deed, the Council formally accepted that the Uniting Church had air space rights that were capable of transfer by writing to the solicitor for the Church on 23 August 1989:

Reference is made to your letter dated 25 July, 1989, regarding the application by your Client, The Uniting Church in Australia Property Trust (NSW) for permission to complete the sale of the transferable floor space in respect of the historic building known as "Pilgrim House".

Council at its meeting on 14 August, 1989, decided to grant its consent to The Uniting Church of Australia being registered as owners of 1214 square metres of floor space available for transfer from the subject site, subject to the following conditions, namely: -

(1) That the prerequisite legal documentation and agreements for such registration shall be prepared by the City Solicitor;

(2) That the date of registration shall be that date on which all legal documentation and agreements have been executed to the satisfaction of the City Solicitor and the Director of Planning and Building;

(3) That all monies from any sale of transferable floor space shall be held in an interest bearing trust account operated by Council;

(4) That monies held in the trust account shall be released on the completion of work to the satisfaction of the Director of Planning and Building, minus a management and transaction fee equalling one half of the interest accrued during the life of the trust account, this fee will be inclusive of all Council's legal costs;

(5) That 1214 square metres of registered transferable floor space shall not be incorporated in part or in full to any development in the City without the prior consent of Council.

and that any relevant documents be executed, if required, under the Common Seal of the Council or by Council's Attorney.

Finally, on 25 September 1990 (more than a year after Immer's purported rescission of the deed) the Council wrote in terms which sanctioned a transfer of the Uniting Church's air space rights to Immer. The letter read:

Council confirms that the Uniting Church in Australia Property Trust (N.S.W.) ("the Trust") has been entered in Council's Register of Transferable Floor Space as the holder of 1,214 square metres of transferable floor space. The Council notes that by deed dated 14 October, 1988, the Trust has agreed to transfer the said floor space to Immer (No. 145) Pty. Limited ("the Purchaser").

In respect of the completion of the transfer of the said floor space, all the requirements of the Council have been satisfied and the Council will enter the Purchaser as the holder of the said floor space upon the tender, in a form satisfactory to the City Solicitor, of a notice under Section 12 of the Conveyancing Act 1919 in respect of the transfer, addressed to the Council and executed by the Trust.

On 29 March 1989, that is, just before the date mentioned in cl. 7 of the deed, the City Solicitor wrote to Mr. Dixon-Smith, the solicitor for Immer, to say that the deed executed by the parties was satisfactory. He said that approval of the deed "is recommended" subject to certain conditions, none of which required completion of restoration work on Pilgrim House as specified in the Council's letter of 14 September 1988. He concluded: "I will await receipt of the executed deed and the notice of assignment." This was a reference to a deed of assignment and notice thereof which the parties contemplated would be completed in due course [9] . As Meagher J.A. observed in the Court of Appeal, it might seem odd that the City Solicitor should write to the purchaser rather than the vendor but "this curiosity is explicable by the fact that the Deed gave to the purchaser the responsibility of pursuing the Vendor's application to the Council".

On 24 April 1989 the Uniting Church's solicitor, Mrs. Dale, wrote to Mr. Dixon-Smith as follows:

We now consider that the conditions of clause 3 of the Agreement dated 14 October 1988 have been satisfied in that the Council has indicated consent and in the terms of the city solicitor's letter the matter should now be completed. In order that completion can take place without delay please forward to us a draft deed of assignment for execution by our client and notice thereof addressed to the Council.

We maintain that the city Council has not made any condition upon the transfer such as the completion of the refurbishment of Pilgrim House and therefore the matter can now be completed without delay.

Clause 3 of the Agreement states that completion will take place within seven days of the notice from you that the Council has granted the Application. We therefore request the assignment be submitted for execution and after execution of the same by our client settlement can be arranged immediately.

Notwithstanding the first paragraph quoted, it should have been apparent to the author that cl. 3 of the deed had not been satisfied. The Council had not "granted the Application". And notwithstanding the second paragraph, the condition attached to the Council's letter of 14 September 1988 regarding completion of restoration work on Pilgrim House was far from met and the Council had not said anything to suggest that the condition was not still operative.

On 29 May 1989 Immer's solicitors sent to the Uniting Church's solicitors a draft form of assignment as required by s. 12 of the Conveyancing Act 1919 (NSW). The author speaks of the assignment having been "sent to my client for execution"; presumably the document had been prepared by the City Solicitor.

On 7 June 1989 Mrs. Dale had a telephone conversation with Rev Denham of the Uniting Church who said:

John Hughes of Leda Holdings [a company associated with Immer] has told me that Dixon-Smith says that completion is against the Council's code - because of an interim policy adopted by Council. He says that money is no problem. On 9 June 1989 the Uniting Church's solicitors wrote to Immer's solicitors, demanding completion. In that letter, referring to concern expressed by Immer about the incomplete state of the renovations to Pilgrim House, Mrs. Dale said: Again we reiterate that as the City Council has not made completion of Pilgrim House a condition and completion in the agreement is not conditional upon that completion, the matter must now be finalised.

On 19 June 1989 there was a telephone conversation between Mrs. Dale and Mr. Dixon-Smith in which the former asked the latter: "When is your client going to complete the purchase?" There followed some discussion about the Council's code, at the end of which Mrs. Dale said: "I will give you until tomorrow afternoon to make a decision before we do anything further." The Uniting Church took no immediate action. There was a further telephone conversation on 23 June 1989 in which Mr. Dixon-Smith conceded to Mrs. Dale the Uniting Church's right to issue a notice to complete and agreed to send a deed of assignment and notice of assignment "immediately". He undertook to arrange for settlement "soon".

The twenty-third of June was a Friday. On Monday, 26 June Mr. Dixon-Smith sent to Mrs. Dale a deed of assignment and notice of assignment, finishing his letter with the words: "I am awaiting instructions as to the final date for completion." Recital C of the deed of assignment included the words: "and the Council has approved the said transfer subject to this Deed." In the words of Meagher J.A.: "It is clear enough that the Council had done no such thing, and it is therefore clear that Mr. Dixon-Smith was acting under a misapprehension."

As it happened, on 21 June 1989 the City Solicitor had written to Rev Denham about the documentation of the transaction as between the Uniting Church and the Council. Rev Denham appears to have acted for the Church in its dealings with the Council. The City Solicitor drew attention to the fact that "the draft Deed contemplates that the restoration and refurbishment of Pilgrim House must be completed prior to any transfer of transferable floor space". He concluded: "I have sought instructions from Council in relation to your request to transfer the transferable floor space prior to completion of the works." Rev Denham faxed a copy of the letter to Mrs. Dale on 23 June. It would seem that Mrs. Dale did not know of the letter when she spoke to Mr. Dixon-Smith on 23 June; she certainly saw it on the morning of Monday, 26 June and was "devastated". It is clear that Mr. Dixon-Smith did not become aware of the letter until after he had written his letter of 26 June. Mrs. Dale did not speak to Mr. Dixon-Smith about the contents of the City Solicitor's letter of 21 June until 29 June. On that day there was a telephone conversation (or conversations) between Mr. Dixon-Smith and Mrs. Dale in which the former said he thought settlement might take place in the following week, that Immer was waiting on its financier and that he (Dixon-Smith) would chase the matter up. On the same day, presumably after any telephone conversation with Mrs. Dale, Mr. Dixon-Smith received from the City Solicitor a faxed letter reiterating that the Council would not approve a transfer of air space rights until restoration work on Pilgrim House had been completed.

On 25 August 1989 Mr. Dixon-Smith faxed to Mrs. Dale a letter containing a notice by Immer rescinding the agreement between the parties on the ground that approval for the proposed transfer of surplus bonus had not been granted by 1 April 1989. The notice required return of the deposit of $230,660.

On 15 November 1989 the solicitors for the Uniting Church gave to Immer a notice to complete the purchase by 22 November 1989.

On 21 September 1990 the Uniting Church issued a summons out of the Supreme Court of New South Wales in which it sought a declaration that the agreement contained in the deed of 14 October 1988 "subsists and continues on foot" and an order that Immer specifically perform that agreement. Immer's response was that it had rescinded the agreement by its notice of 25 August 1990 which it had given pursuant to cl. 7 of the deed, approval for the transfer of air space rights not having been given by 1 April 1989. The Uniting Church met this defence with the contention that once 1 April 1989 had passed Immer had an option to exercise its right of rescission under the deed or to affirm the agreement and that, by its conduct, it had "elected to affirm" the agreement. In its pleading the Uniting Church identified as "particulars of election": (a) the letter of 29 May 1989 from Immer's solicitors to the Uniting Church's solicitors enclosing the draft form of assignment; (b) the telephone conversation of 23 June 1989 between Mr. Dixon-Smith and Mrs. Dale; (c) the letter of 26 June 1989 from Immer's solicitors to the Uniting Church's solicitors enclosing a deed of assignment and notice of assignment; (d) the telephone conversation (or conversations) of 29 June 1989 between Mr. Dixon-Smith and Mrs. Dale; (e) the lapse of time from 28 [sic] June 1989 until the giving of the notice of rescission on 25 August 1989.

Young J. held that nothing in the conduct of Immer constituted an election to proceed with the agreement on its part. The Court of Appeal (Samuels A.P. and Handley J.A., agreeing with Meagher J.A.) concluded that there had been an election to proceed by Immer, that Immer had thereby lost its right to rescind the agreement and that there should be an order for specific performance of the agreement in favour of the Uniting Church [10] . Against that order Immer now appeals.

The judgment of the Court of Appeal is reported in (1991) 24 N.S.W.L.R. 510 but only on issues which are not the subject of the appeal to this Court. [See also 74 L.G.R.A. 255 - Ed.]

This appeal does not turn simply on whether the conduct of Immer, viewed objectively, constituted an election not to exercise its contractual right of rescission. Rather, the question as argued is whether, in the light of Immer's knowledge or lack of knowledge of relevant circumstances, it can be held to have so elected. In Sargent v ASL Developments Ltd [11] Stephen J. said:

The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other. Mason J. put the matter this way [12] : A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd v Goonan [13] ). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract. 1. (1974) 131 C.L.R. 634, at p. 646. 2. (1974) 131 C.L.R., at p. 656. 3. (1964) 111 C.L.R. 41.

The consequences of election may well be serious for the party electing; in particular, election involves the abandoning of a right that is available. A party can only be held to have elected "if he has so communicated his election to the other party in clear and unequivocal terms" [14] .

The "Kanchenjunga" , [1990] 1 Lloyd's Rep. 391, at p. 398, per Lord Goff of Chieveley.

It was the letter of 26 June 1989 written by Immer's solicitors to the Uniting Church's solicitors that the Court of Appeal regarded as constituting an election by Immer to abandon its contractual right to rescind the agreement between the parties. Meagher J.A. put the matter thus:

On 26 June 1989 [Immer] could have taken one of three courses: it could have rescinded the deed, but it did not do that; it could have done nothing at all, in which case its contractual right of rescission would have survived; or it could have taken the course, inconsistent with the first of those courses, of keeping the deed on foot. It chose the third course.

Immer made two broad submissions in this Court. First, it contended that the letter of 26 June did not amount to an election not to exercise its right of rescission. Immer said that even applying a truly objective test to its conduct, the letter of 26 June 1989 and the documents accompanying it did not constitute an election. But it said further that the test was not purely objective, that there had to be taken into account the state of knowledge (more accurately, lack of knowledge) of Immer at the time it wrote the letter and that this consideration made it impossible to conclude that Immer then elected to abandon its right of rescission. Second, it argued that if it had made an election, that election could be avoided by reason of the doctrine of mistake.

As to the question "was there an election", Immer pointed to the draft deed of assignment which accompanied the letter of 26 June 1989 and in particular to Recital C which read:

Application has been made to the Council of the City of Sydney (the "Council") for the transfer of floor space bonus available to the Vendor under the Council's development control and floor space ratio code in respect of 1,214m2 of floor space entitlement (the "Floor Space Rights") to the Purchaser to be assigned for the benefit of the Property leased by the Purchaser comprised in Certificates of Title Volume 2884 Folio 66 and Volume 4725 Folio 187 and the Council has approved the said transfer subject to this Deed and a notice pursuant to this Deed being entered into and served upon the Council. It was of course the words "and the Council has approved the said transfer" upon which Immer placed great reliance. It contended that, as a matter of construction of the correspondence, Immer was saying no more than it was proceeding to complete the transaction on the footing that the Council had approved the transfer and that the Uniting Church was then in a position to carry out its obligation to bring the agreement to a conclusion. This footing precluded a conclusion that on 26 June Immer was unequivocally giving up its right to rescind.

Immer's further submission under this head was that there could have been no election for, on 26 June 1989, it did not have the requisite knowledge of the relevant circumstances. Immer accepted that it could have been held to an election without awareness of the legal situation which would have allowed it to rescind, but said that it could not have been so held unless it was aware of the facts giving rise to the right to avoid the deed. In this regard it pointed to the judgment of Mason, Brennan, Deane and Dawson JJ. in Khoury v Government Insurance Office (NSW) [15] :

It would seem however that, at least where the alternative rights arise under the terms of the one contract, a party may be held to have elected to affirm it notwithstanding that he was unaware of the actual right to avoid it Even in such a case however, the party alleged to have elected to affirm the contract must be at least aware of the facts giving rise to the right to avoid the contract. On this basis, Immer argued that on 26 June 1989 it was not aware of the facts giving rise to its right to rescind the agreement because it did not know that the Council was actively asserting that the relevant permission had not been given. The answer to this submission is that the evidence does not support a conclusion that Immer was unaware of the fact giving rise to the right to rescind under cl. 7 of the deed, that is to say, the fact that "approval" had not been "granted by 1.4.89". Nonetheless, Immer's mistaken belief that the approval of the City Council had been given at some subsequent time is, as will be seen, relevant to the question whether it lost the right to rescind the deed by reason of an election to affirm it. 1. (1984) 165 C.L.R. 622, at pp. 633-634.

The true nature of election is brought out in this sentence from the seminal work of Spencer Bower and Turner, The Law Relating to Estoppel by Representation [16] : "It is of the essence of election that the party electing shall be "confronted" with two mutually exclusive courses of action between which he must, in fairness to the other party, make his choice." When Immer's solicitors wrote their letter of 26 June 1989, the date 1 April 1989 in cl. 7 of the deed had passed. It was then open to Immer, as purchaser, to rescind the deed, subject to any question that might arise as to whether rescission could be effected peremptorily or only after reasonable notice. Can it be said that Immer was then confronted with two mutually exclusive courses of action between which it must choose? Were its actions consistent only with an intention to keep the agreement on foot and inconsistent with the exercise of the right to rescind [17] ?

3rd ed. (1977), p. 313. 2. While cl. 7 of the deed spoke of "rescind", strictly the right conferred on Immer by that clause was a right to terminate the contract: see Cheshire and Fifoot's Law of Contract, 6th Aust. ed. (1992), par. 2104.

If a party to a contract, faced with the choice of terminating the contract or keeping it on foot, terminates the contract that party will ordinarily have acted in a way that leaves no doubt as to the choice made. And that choice will be clearly inconsistent with the exercise of the right to keep the contract on foot because the contract no longer exists. But where, as here, the situation is the converse the question is not answered so readily. Immer was proceeding on the footing that the Council had approved the transfer of air space rights and that completion of the transfer was possible. Mr. Dixon-Smith wrote the letter of 26 June 1989 in that belief. But it was not the case. Not only was it not the case but Mrs. Dale would have been aware at the time she received the letter that it was not the case and that restoration and refurbishment of Pilgrim House was still a condition of that approval being obtained.

As Spencer Bower and Turner point out in the passage quoted earlier, at the heart of election is the idea of confrontation which in turn produces the necessity of making a choice. But in a case such as the present one, the choice is not merely one of affirming the agreement; it involves as well the abandonment of the right to rescind. Abandonment is more readily inferred in some circumstances, for instance where the choice arises once and for all. Here, by reason of cl. 7 of the deed, Immer was entitled at any time after 1 April 1989 to rescind the deed. There is of course a danger of circularity here because the Uniting Church says: "Yes, so long as Immer did not elect not to rescind." The point is that where the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question.

There can be no doubt that when Mr. Dixon-Smith wrote the letter of 26 June 1989 it was Immer's understanding that the Council had approved a transfer of air space rights and that there was no obstacle to early completion on the transaction. That is manifest from the correspondence. In Tropical Traders Ltd v Goonan [18] Kitto J. commented:

Not that election is a matter of intention. It is an effect which the law annexes to conduct which would be justifiable only if an election had been made one way or the other. On the other hand, in Sargent v ASL Developments Ltd [19] Mason J. said of the elements essential to the making of a binding election: The question is complicated because in some instances election may take place as a matter of conscious choice with knowledge of the existence of the alternative right and in other cases it may occur when the law attributes the character of an election to the conduct of a party. But, in drawing this distinction, Mason J. was focusing on the dichotomy between awareness of the right to rescind and awareness of the facts giving rise to the right. We do not read that passage from his Honour's judgment as implying that a party to a contract who is aware either of the right to rescind or of facts giving rise to a right to rescind will necessarily be held to have elected to affirm a contract if he or she acts on the basis that the contract remains on foot. Such an implication is at odds with the notion of being confronted with the necessity of making a choice. In the present case it cannot truly be said that Immer was confronted with the necessity of making a choice at the time the letter in question was written, even less that it was abandoning for all time its rights under cl. 7 of the deed. 1. (1964) 111 C.L.R., at p. 55. 2. (1974) 131 C.L.R., at p. 656.

The evidence indicates that the solicitors for Immer and the Uniting Church both assumed that the letter of 29 March 1989 which notified the City Solicitor's approval of the deed but did not mention the requirement that the restoration work on Pilgrim House be completed meant that the approval of the Council was a formality. Be that as it may, the forwarding by Immer's solicitors on 26 June 1989 of documents for settlement, including the draft deed of assignment reciting the approval of the Council, was clearly on the basis that the Council had, by then, approved. In a context where the Council had not, in fact, approved the transfer and where the stage had not been reached where Immer was required to make an election either to rescind the contract or to abandon the right to rescind, the forwarding of the documents for settlement did not constitute an election to affirm the contract regardless of whether the Council had or had not approved.

The letter of 26 June 1989 and Immer's actions at the time were consistent with Immer being prepared to continue with an agreement which it understood to be ready for completion and because of which it did not direct attention to its rights under cl. 7. No prejudice was caused to the Uniting Church by Immer's actions; the possibility of rescission was due to the Church's inability to obtain the approval for the Council to the transfer of air space rights, an approval which was not obtained until September 1990.

In our view Immer's actions in and about June 1989 did not constitute an election on its part not to exercise its right of rescission.

Immer sought to rely upon Mr. Dixon-Smith's misapprehension of the true position regarding transfer of the air space rights and Mrs. Dale's awareness of that misapprehension as an argument based on the doctrine of mistake. The precise roles which a mistake in the mind of a party said to have made an election and an awareness by the other party of that misapprehension will play in this context no doubt call for clarification. In particular, questions arise as to the relationship between mistake in this context and the more general understanding of mistake in the law of contracts and the doctrine of estoppel. But, apart from the fact that a decision to uphold the appeal does not call for consideration of these questions, there are good reasons why the Court should not be led into those areas in the present case.

To begin with, Immer's case as pleaded was that the Uniting Church represented to it that the Church "was entitled to an exemption from the usual conditions imposed by Council in relation to transfer of surplus bonus floor space" and that in reliance on that representation Immer took the steps it did, in particular the sending of the letter of 26 June 1989. Immer further pleaded that if its actions did amount to an election, the Uniting Church was estopped, by reason of the representation, from relying upon those actions. No evidence was led by Immer to show that it relied upon anything said by Mrs. Dale; Mr. Dixon-Smith did not give evidence. The Court of Appeal rejected an argument based on a misapprehension on the part of Mr. Dixon-Smith, induced by Mrs. Dale, on the ground that it was irrelevant and in any event lacked any factual basis. In all the circumstances it would be inappropriate to allow Immer to raise this particular issue on the appeal to this Court.

However, for the reasons given earlier, we would allow the appeal, set aside the order of the Court of Appeal and restore the judgment of Young J. delivered on 15 November 1990.

See Conveyancing Act 1919(NSW)

At a glance

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Decision date

Before

Source

Judgment (86 paragraphs)

Parties

Legislation Cited (2)